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Exam 6: Corporate-Level Strategy

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Question 41

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Firms that sold off related units in which resource sharing was a possible source of economies of scope have been found to produce lower returns than those that sold off businesses unrelated to the firm's core businesses.

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Question 42

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Corporate-level strategy is concerned with ____ and how to manage these businesses.

A) whether the firm should invest in global or domestic businesses
B) what product markets and businesses the firm should be in
C) whether the portfolio of businesses should generate immediate above-average returns or should be troubled businesses which will create above-average returns only after restructuring
D) whether to integrate backward or forward.

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Question 43

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Antitrust regulation, tax laws, and low performance are all value-neutral reasons why firms engage in diversification.

The curvilinear relationship of corporate performance and diversification indicates that

An unrelated diversification strategy can create value through two types of financial economies: (1) efficient internal capital allocations, and (2) purchasing other firms, restructuring their assets, and selling them.

Google's diversification could lead the firm towards a related linked strategy and give the firm advantages in multipoint competition with competitors such as Facebook and Microsoft (Chapter 6 Strategic Focus).

Which type of diversification is most likely to create value through financial economies?

Different incentives to diversify sometimes exist, and the quality of a firm's resources may permit only diversification that is value neutral rather than value creating.

Operational relatedness is created by ___________of___________.

The purchasing of firms in the same industry is called:

Compared to diversification that is grounded in intangible resources, diversification based on financial resources only is more visible to competitors and thus more imitable and less likely to create value on a long term basis.

A noted professional art academy has founded an "artists and friends" travel company specializing in tours for artists to scenic locales, using its faculty as traveling teachers. In addition, the art academy has purchased a framing company to both make frames for academy art works, but also to sell museum-quality framing services to the public. The art academy is engaging in diversification based on ____ relatedness.

Virgin Group successfully transfers its marketing core competence across airlines, cosmetics, music, drinks, mobile phones, health clubs and a number of other businesses. Virgin follows a ____ diversification corporate strategy.

GE (discussed in the Chapter 6 Opening Case) is an example of a firm that has used internal capital market allocation as a means of creating value even though it competes using a related linked rather than an unrelated diversification strategy.

The Mars acquisition of the Wrigley assets was part of its related constrained diversification and added market share to the Mars/Wrigley integrated firm. It allowed Mars to gain _______because it could sell its products above the market level or reduce its costs below the market level.

Dragonfly Publishers of children's books has purchased White Rabbit, another publisher of children's books. Both companies' books are sold to the same retail stores and schools. Their content is different, since Dragonfly produces children's literature, whereas White Rabbit focuses on child-level scientific and nature topics. Which of the following statements is probably TRUE about this acquisition?

Companies in emerging markets frequently use the unrelated diversification strategy because of the absence of a "soft infrastructure" in those markets.

The basic types of operational economies through which firms seek value from economies of scope are

The more sharing of resources and activities among businesses, the more ____ is the relatedness of the diversification.

The drawbacks to transferring competencies by moving key people into new management positions include all EXCEPT